Spain may ask for a bailout next year: CCAM

A lot of people think that Spain will ask for a bailout in November. In an interview to CNBC-TV18, Mark Konyn, CCAM says Spain has been delaying this for sometime. "They have issues within the country as well. There is an expectation in the market that this could drag on for sometime," he adds.

Also read: EU reaches a deal on supervisory body for euro-zone banks

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar.

Q: It is day two of the EU summit. Are there any big expectations?

A: We seem to have avoided the big stand off that perhaps was brewing before the summit. The French and the German seemed to be moving in different directions in terms of the pace, putting in place a single banking supervisory body and the pace at which the ECB could pick up that role and therefore act in the markets directly and help some of the sovereigns countries that are struggling to finance their debts. That seems to be an avoided. The communication coming out of it so far is that they have agreed to the year-end target with the ECB picking up that role fairly quickly thereafter.

Q: The Spanish yields have been surprisingly strong. We have seen the yields fall to as low as 5.3% over the past 48-72 hours, does this make it a negative for Spain to ask for money at all? Does this postpone the bailout?

A: It is a sort of self fulfilling prophecy. As the market comes to expect action, it pushes yields down and it makes it less likely for the Spanish and others thereafter including the Italians potentially to come in and opt for that bailout, which we know is required. So, yes, there will be push and pull from the market. But ultimately, we need to get those yields down and the Spanish will need to seek that bailout.

Q: A lot of people expect that Spain will ask for a bailout in November. Do you think that is likely? If it happens or if it does not happen, what is going to be the market reaction?

A: The Spanish have been delaying this for sometime. They have some issues within the country as well within the different regions. So, I think there is an inbuilt expectation in the market that this could drag on for quite sometime. When the posturing  and the positioning of a single authority for banking supervisory powers makes it a lot more easy going into next year, perhaps for some of these issues to be resolved.

I think that though the markets are waiting with bated breath for Spain in the near-term to come forward. I think what we need to see is a look through on those economic numbers. The economy has been quite weak.

But when you focus more on Asia now, you can see the impact to some of their weakness coming through with deteriorating trade positions.